Is the Future of Food in Tokyo?

TOKYO–The humble euglena gracilis is tiny, green and very strange: Part animal and part plant, the darting little long-tailed beastie can be found by the millions in nutrient-rich freshwater ponds.

And Japan’s Mitsuru Izumo thinks it can feed and fuel the world.

The 33-year-old visionary, who receives the prestigious Japan-U.S. Emerging Leader in Innovation Award at Stanford University’s Japan-U.S. Innovation Symposium tomorrow, has raised millions in venture capital from some of Japan’s biggest brands and best-known entrepreneurs to launch and build Euglena, a company dedicated to turning the humble microorganism for which it’s named into a valuable commodity.

The Japanese slang term for euglena is midorimushi, which translates literally into “green bug.” It’s only half accurate, since euglena gracilis isn’t a bug — it’s a single-celled protist — but it most certainly is green, due to the fact that euglena are one of the very few animal-like creatures on Earth that are capable of photosynthesis.

This hybrid status gives euglena some highly unusual properties: While it can survive and thrive on carbon dioxide, water and sunlight like a plant, it nevertheless produces both plant and animal lipids and amino acids, making it one of nature’s few “whole” sources of fat and protein — the omnivore’s solution, if you will. As if that weren’t enough, it also manufactures a unique starchlike carbohydrate, paramylon, that shows signs of effectiveness in boosting immune systems, reducing cholesterol and moderating insulin response when used as a nutritional supplement, plus a rich array of anti-oxidants like beta-carotene and vitamins C and E.

All this makes the euglena a rather intriguing creature, which helps explain Izumo’s fervent belief in the organism’s unique potential. He literally wears his passion on his chest — he’s never seen without his signature neon-green tie — and it extends to the decor of Euglena’s headquarters, where doors and walls are covered with bright-eyed slogans like “Another future,” “Our weapon is euglena” and “The possibilities are limitless.”

But it’s all in line with the equally fantastic story behind the company’s founding, which begins over a decade ago, when Izumo was a freshman at Japan’s prestigious Tokyo University.

“When I was 18, during our summer vacation period, I went to Bangladesh to take an internship with Grameen Bank, basically to see all of their programs and write a summary of their activities,” he says. “And what I saw there led me to decide that I wanted to dedicate my life to solving the world’s problems — poverty, malnutrition, hunger. But I also knew that it would take a miracle to do that.”

An avid manga reader, Izumo’s thoughts naturally turned to his favorite adventure series, Dragon Ball, which prominently featured a foodstuff known as senzu beans. The magical legumes are so nutritious that a single bean can sustain an adult for 10 days, and can heal injuries that might otherwise be fatal.

“What I realized was that the miracle that the world needed was ‘senzu beans,’” he says. “But senzu is fiction. Did anything like that exist in reality? I researched and researched, I even switched my major to agricultural sciences, and I found nothing.”

That was when Kengo Suzuki, one of Izumo’s new colleagues at Tokyo University’s agriculture division, suggested he take a look at the euglena. Izumo did, and realized Suzuki had stumbled upon the answer.

“Senzu beans have all the nutrients people need — and so do euglena, both plant and animal nutrients,” says Izumo. “Only euglena has that characteristic! So I told him, this is it. This is what I’ve been looking for!”

The problem was that no one had figured out a way to efficiently farm euglena outside of the laboratory in quantities large enough for exploitation. Though Suzuki had some promising ideas, they were still very much in the early development stage — not yet ready to put in front of funders. When a frustrated Izumo graduated from Tokyo University, still obsessed with finding a way to make a euglena-based future possible, he took a typical job for a graduate from the nation’s top school, working at the giant Bank of Tokyo Mitsubishi.

It would take a meeting with a former “sempai” — elder schoolmate — at Tokyo University to bring Izumo’s green-bug dream back to life. The sempai in question was flamboyant dot-com entrepreneur Takafumi Horie, who had acquired and relaunched the bankrupt ISP Livedoor and turned it into Japan’s biggest digital services provider. Horie’s personal style and public identity outraged Japan’s staid and conservative corporate establishment — he dated models and actresses, drove an exotic sports car and was the nucleus of a similarly young and wild circle of startup mavens who were called the “Roppongi Hills Tribe.”

Despite being alumni of the same top college, the carefree and reckless Horie and the earnest, idealistic Izumo couldn’t be more different. Yet Horie immediately connected with Izumo’s outsized enthusiasm, and, in 2005, he offered his junior the angel capital to seed-fund his euglena-based startup.

Jeff Yang

Mitsuru Izumo photographed at Euglena in Tokyo.

“Mr. Horie was our very first investor,” says Izumo. In addition to capital, “he offered me a desk and a PC at Livedoor on the 38th floor at Roppongi Hills; he gave me access to meeting space, desks, chairs — many, many things.”

Izumo promptly quit his banking job and moved into the swank Livedoor complex in Roppongi — “This choice was very shocking to my parents,” admits Izumo” — and began building the midorimushi future.

But only a year later, everything would come apart again. On January 18, 2006, investigators raided Livedoor and arrested Horie for securities fraud, alleging that he had falsified accounting records to turn a massive loss into a $60 million profit in order to fool shareholders. According to the Associated Press, Horie was convicted on securities fraud charges in 2007 and after an unsuccessful appeal, went to prison in 2011 for nearly two years before being released on parole in March of this year. Izumo managed to avoid being swept up in the mayhem, “but of course, I was pushed out of Roppongi Hills! And because Horie-san was captured, I had to start over and find a new backer.”

The investor who stepped up to give Euglena a fresh start was none other than Makoto Naruke, the former president of Microsoft Japan, and now the founder and director of the investment and consulting group Inspire. Naruke is well known for both his brilliance and his eccentricities; called “the business world’s most prolific reader,” he admits to be simultaneously reading over 10 books at any given time, claiming that this “Super Parallel” method helps to stimulate and activate many different parts of his brain. Naruke has said that “childlike persistence, defiance and simplicity are much more important” to business success than skills or experience. It’s not surprising that he found Izumo’s pitch appealing.

“Naruke-san funded a second startup for Euglena, allowing me to bring on Mr. Suzuki as our CTO and Mr. [Takayuki] Fukumoto as our CMO,” says Izumo. “He became my mentor, and is still one of our key advisors.”

The second chance gave Izumo and Suzuki the opportunity to solve the problem of cultivating Euglena at an industrial scale. “Before our innovation, euglena could be grown in clean rooms a few liters at a time,” says Izumo. “We are able to produce them in outdoor cultivation ponds, currently at the rate of 140 tons a week.”

Unlocking that conundrum was enough to convince VCs, as well as leading companies like Itochu All Nippon Airlines and Nippon Oil Corporation, to jump onto Euglena’s bandwagon. Just last year, Izumo took Euglena public on the Tokyo Stock Exchange’s MOTHERS (“Market Of The High-growth and Emerging Stocks”) Index, a listing focused on young, fast-rising enterprises. Since then, the stock has skyrocketed, hitting a peak in May of 16,510 yen, almost ten times its original offering price — based in part on rumors that Japanese Prime Minister Shinzo Abe’s vow to stimulate the nation’s moribund economy would lead to a turbo-boost in government funding for biotech and greentech startups.

But there’s more behind Euglena’s rise than just speculation: The company is a rare example of a green biotech startup that’s actually making money while growing fast. Euglena has been profitable since 2010, and has seen revenues boom by nearly 300% over the past three years.

Today, Euglena’s business is based on the production of health foods and supplements that leverage euglena’s unique nutritional profile, including euglena-boosted meal replacement bars, protein powders, cookies and even “green curry.”

“In Japan alone, the supplement market represents about a 10 billion yen opportunity,” says Izumo. “And I think we can easily grow that by three times in a few years. Soon we’ll be cleared to export euglena to Mainland China, Hong Kong, and Taiwan — China alone is at least a 30 billion yen market. We are looking to expand to the U.S. and Europe, but those markets are not as familiar with the idea of eating something like seaweed.” Izumo notes, however, that other microorganism-based supplements, such as chlorella and spirulina, have proven successful in the West. “Euglena is very similar to those, so we can adapt their ways of marketing.”

But health foods are just a short-term emphasis. They’re also exploring partnerships in the cosmetics space for a euglena extract they’ve called Rejuna, which has been shown to reduce fine wrinkles and signs of skin fatigue. They have a pilot program using euglena as animal and fish feed.

“In Japan, we eat a lot of fish, and so we’re spending a great deal of money in aquaculture, and right now the feed is being imported from China,” says Izumo. “The government is very interested in using euglena as an innovative food source for fish.”

But long term, of course, the opportunity is all about green energy. Or green bug energy. There are other companies, such as U.S.-based Solazyme, that are exploring the use of algae as feedstock for the distillation of biodiesel. But Euglena believes its euglena-based solution has an edge, due to the ease with which crude euglena oil can be refined into usable fuel.

“Our problem is scale,” says Izumo. “We estimate that with a investment of 100 billion yen, we will be able to build a one-square-kilometer cultivation pool, the minimum we would need to be cost competitive as fuel.” The resulting biodiesel would still be slightly more expensive than standard diesel — about 200 yen per liter, as compared to the current 150 yen per liter for traditional fuel. “But we are seeking to be a ‘low carbon carrier,’ not a ‘low cost carrier,’” says Izumo. “We would be able to produce about 10% of the jet fuel needed by Japan, sustainably and in a way that increases our energy independence.”

The company, which is currently exploring potential cultivation sites in Southeast Asia, the Middle East and even Florida and Hawaii, with the goal of beginning bio-jet fuel production in 2018. Euglena’s promise as a source of green “black gold” explains the stakes taken by ANA and Nippon Oil in the company. And yet, to Izumo, all of these commercial opportunities are still just enablers to his original aim — of finding a miracle that can save the world.

That’s why Euglena has now come full circle, partnering with the Bangladeshi government on a program in which the company will set up a plant in the country to produce euglena-based protein biscuits, to be distributed for free to school-aged children.

“Just 50 grams of biscuit a day can supplement the child’s standard diet with all the protein, and all the necessary minerals, fatty acids and vitamins they need,” says Izumo. “We calculate that the cost will come to just 10 yen — 10 cents — per day. Everything will be manufactured in Bangladesh, by Bangladeshis. Because their tastes are different from Japanese, and we want to make sure these are made for local tastes, or otherwise, the children won’t eat them.” (Izumo’s aide, Mohammed Akharuzzaman, notes in an aside that given Bangladesh’s Muslim population, the company has sought out word on euglena’s dietary status under Islam and believes it to be halal: “We are receiving official approval from a halal authority soon.”)

The company currently makes euglena biscuits in meal-replacement bar and in cookie form. Izumo graciously provides me with boxes of both varieties to sample. The Euglena Bar is dense and filling, cakey but with a faint undertone of ocean. The Euglena Cookies are sweeter, with a heavier crumb. Both are perfectly fine (and packed with protein and 59 micronutrients).

“These are made for Japanese tastes,” says Akharuzzaman. “In Bangladesh, they like very sweet things, so the recipe will be fortified with more sugar and salt.”

But regardless of the recipe, the core ingredient of the biscuits, the fine, lime-colored dried euglena powder that looks like new green tea, is the same. And, says Izumo, the 10 yen per child cost will only drop as the company ramps up cultivation for other purposes: The high-protein powder is essentially a free byproduct of the process that extracts euglena oil for biodiesel.

Food. Fuel. Magic. All wrapped up in a little green bug.

“I do think we have found it,” says Izumo, breaking out in a broad smile. “Euglena is our real-life senzu bean.”

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Must-Click Quick Hits from Across Asian America — the “what I did on my summer vacation edition”

Filling in for Phil: Our blogfriend Angry Asian Man is on a much-needed vacation, and has had an amazing array of guest bloggers posting in his absence, including me. Here’s my essay on puppets, musicals and why “a little bit of racism” is nothing to sing about.

Happiness is…: I spoke at the Google-sponsored Happiness Summit this week, on why “experience is the new black.” The Journal wrote about it! Here’s the video and slide deck, if you’re interested.

More Miyazaki: As you can tell, I’ve been (mostly) in Japan the past few weeks — and while in Tokyo, made my pilgrimage to the Ghibli Museum, which celebrates the amazing work of animator Hayao Miyazaki and his fellow Studio Ghibli animators. Well, the next opus from the grandmaster has arrived, a historical drama called “The Wind Rises,” and it looks incredible — and it’s already Japan’s biggest movie of the year to date. Check out the teaser trailer here, and cross your fingers for a quick U.S. release.

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